January 24

1916: Brushaber v. Union Pacific Railroad Co., is decided. The United States Supreme Court heard the case based on income taxes. The Sixteenth Amendment to the US Constitution had been passed in 1913 and in response to that passing, the Revenue Act of 1913 was implemented. The Act permitted the imposition of an income tax but these were not apportioned among the states based on state population. Frank R. Brushaber was the plaintiff and he was also a shareholder in the Union Pacific Railroad Company (the defendant). Brushaber wanted an injunction to stop the company from paying the taxes levied against it. He believed the tax to be in violation of the Fifth Amendment, stating it was taking away personal property without due process. He also argued the tax was not apportioned among the states and was therefore unconstitutional.

The case was argued before the Court on October 14-15, 1915. The verdict was handed down on this day, with an impressive 8-0 decision (Justice James Clark McReynolds did not participate). Chief Justice Edward Douglas White opined the Sixteenth Amendment removed the need for apportioning by population. He reviewed the rights and powers listed in the amendment and found them to be consistent with the Revenue Act. He also found the Constitution gave the government power to institute taxation itself and it was not seizure without due process. Other arguments were similarly handled and the landmark case confirmed the government’s power to issue a personal income tax.

Taxation is the price for society and civilization. The pooling of funds to provide for the greater good has been an issue since societies began. Who is to pay for the projects needed by all to live in concert? Funds can be obtained in only so many ways and taxation seems to have become standard practice. The tariffs and taxes can be levied against certain goods or against other real property, including income. The benefit of funding the government has been seen as outweighing the personal sacrifices made by the taxpayers.

The first time a personal income tax was bandied about for US citizens was during the War of 1812. The war ended before the need for the funds was imperative and the tax was never enacted. During the US Civil War, Congress imposed the first personal income tax in 1861 but the law was repealed in 1862. In 1894, the first peacetime income tax was imposed but only on the top 10% of American households had income high enough to be taxed. It was deemed unconstitutional because it counted rents and interest income from personal property. The Sixteenth Amendment clarified what would be considered taxable income. Several times the idea of taxation has come before this highest Court and the personal income tax remains a viable way to support the common good of society.

Every diminution of the public burdens arising from taxation gives to individual enterprise increased power and furnishes to all the members of our happy confederacy new motives for patriotic affection and support. – Andrew Jackson

Nearly everywhere monarchs raised themselves further above the level of the greatest nobles and buttressed their new pretensions to respect and authority with cannons and taxation. – J. M. Roberts

Taxation is just a sophisticated way of demanding money with menaces. – Terry Pratchett

If it is the duty of the State to educate, it is the duty of the State also to bear the burden of education, namely, the taxation out of which education is provided. – Edmund Barton